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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's affirms Ventas' ratings, revises outlook to negative

27 Mar 2020

New York, March 27, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings of Ventas Inc. and its subsidiaries, including its Baa1 senior unsecured debt rating. The ratings outlook has been revised to negative from stable.

The ratings affirmation reflects Ventas' position as one of the largest healthcare REITs, as well as its property type diversification, strong liquidity and sound capital structure. The outlook has been revised to negative to reflect the risks Ventas faces in its senior housing business, as the coronavirus pandemic is likely to cause acute occupancy decline and cash flow pressure across the industry. We expect Ventas' credit metrics, particularly Net Debt/EBITDA, will deteriorate as a result of these operating challenges.

The following ratings were affirmed:

Ventas Realty, Limited Partnership - Senior unsecured debt at Baa1; Senior unsecured shelf at (P)Baa1; Gtd Senior Unsecured Commercial Paper Program at P-2

Ventas Canada Finance Limited - Senior unsecured debt at Baa1

Nationwide Health Properties, Inc. -- Senior unsecured debt at Baa1

Ventas Inc. -- Preferred shelf at (P)Baa2

Outlook Actions:

Issuers: Ventas Realty, Limited Partnership; Ventas Canada Finance Limited; Nationwide Health Properties, Inc.; Ventas Inc.

Outlook, Change to Negative from Stable

RATINGS RATIONALE

Ventas' Baa1 senior unsecured debt rating reflects its large size and diversification among multiple property types, business models, and operators within the healthcare real estate market. Other key credit strengths include its strong fixed charge coverage ratio, modest use of secured debt and large unencumbered asset base. Ventas also maintains sound liquidity and good financial flexibility to face risks to operating cash flows, particularly within its senior housing operating business (32% of NOI), due to the coronavirus pandemic.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The senior housing sector is expected to be significantly affected due to this population's vulnerability to serious medical complications arising from the coronavirus and their communal settings. More specifically, the weaknesses in Ventas' credit profile, including its direct exposure to senior housing operations, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and it remains vulnerable to the outbreak continuing to spread. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on Ventas of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered.

Prior to the coronavirus outbreak, Ventas' senior housing business had already been under pressure due to industry-wide challenges (new supply, labor costs), as well as operating issues specific to certain of its third-party managers and its sizable presence in some secondary markets. The REIT's challenges have grown more acute due to implications of the coronavirus. Move-ins are expected to sharply decline, inhibiting the REIT's ability to replace natural resident turnover. At the same time, the potential for move-outs to accelerate due to coronavirus-related deaths among this high-risk population is an additional risk. Rising expenses from staffing and supply shortages, as well as increased disease containment protocols, are likely to further impact profitability. Ventas' senior housing operations (32% of NOI) are directly exposed to potentially large NOI declines. The REIT's triple-net portfolio, which includes acute and specialty hospitals and senior housing, also faces risks but the NOI declines are expected to be more modest.

Ventas' property type diversification, including its high-quality medical office building (20%) and university-based research and innovation (8%) portfolios is a distinct advantage in the current operating climate. While these businesses are not immune to macro concerns, they have historically demonstrated less sensitivity to economic cycles and are expected to buffer cash flow declines in Ventas' other businesses.

Ventas' liquidity position provides cushion to absorb declines in operating cash flow. As a precautionary measure, the REIT recently drew down $2.75 billion on its unsecured credit facility and now has a cash balance approximating $2.75 billion. The total revolver is $3 billion and matures in 2021 plus two six-month extension options. Upcoming maturities are very modest and include $277 million coming due in 2020 and $361 million in 2021.

The negative outlook reflects risks Ventas faces in its senior housing business, as the coronavirus pandemic is likely to cause acute occupancy and cash flow pressure across the industry. We expect Ventas' credit metrics, particularly Net Debt/EBITDA, will deteriorate as a result of these operating challenges.

Ratings could be downgraded if Net debt to EBITDA were expected to remain above 6.5x on a sustained basis. Any liquidity challenges, including materially diminished covenant cushion or material operating weakness translating into fixed charge coverage below 3.5x on a sustained basis, could also lead to downgrade. Secured debt increasing to the mid-to-high teens as % of gross assets would also pressure the REIT's ratings.

A ratings upgrade is unlikely but would require Net Debt to EBITDA below 5.0x and effective leverage closer to 30% on a gross asset basis. Secured debt remaining below 10% of gross assets, fixed charge coverage above 4.5x, and reduced operator/manager concentration (top two less than 20% of NOI combined) would also support a ratings upgrade.

Ventas, Inc. [NYSE: VTR] is a healthcare REIT with a diverse portfolio of about 1,200 assets in the United States, Canada and the United Kingdom consisting of seniors housing communities, medical office buildings, university-based research and innovation centers, inpatient rehab facilities and long-term acute care facilities, health systems and skilled nursing facilities.

The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in September 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Lori Marks
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Philip Kibel
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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